Digitisation will help plug tax losses

Digitisation in the Indian cable and satellite (C&S) sector is set to significantly plug tax losses caused by under-declaration of subscriber numbers by some last-mile cable operators, say industry experts.

According to data presented by Jawahar Goel, former president of Indian Broadcasting Federation (IBF), to the Telecom Disputes Settlement & Appellate Tribunal (TDSAT) in 2008, a meagre 6.8% service tax was being declared by cable operators across cities such as Delhi, Kolkata, Bangalore, Chennai, Hyderabad, Jaipur, Ludhiana and Gurgaon.

The data also showed that Delhi, Kolkata, Bangalore, Chennai and Hyderabad were among the cities that reported highest leakage.

Goel said he is in the process of collecting similar data for the last four years, which will throw light on latest scenario.

Low tax compliance, according to industry sources, is because a certain section of cable operators uses various means to influence the tax implementation authorities and gets away with it.

“The not so influential cable operators, however, bear the brunt as they are being made a scapegoat by the tax authorities to meet their targeted revenues. The authorities also go to the extent of arresting such honest cable operators because they refuse to pay up,” said the source requesting anonymity.

The C&S players also feel that the government’s taxation policies need to be rationalised. The fraternity says that a lot was promised like fiscal incentives, some compensation in terms of taxations, etc, but nothing has really happened.

Harit Nagpal, MD & CEO, Tata Sky and president of DTH Association, said, “We are okay with tax. But over-taxation or multiple-taxation is certainly a problem. The state takes the entertainment tax. The Centre charges the service tax. There is duty on imported set-top boxes. And this is in addition to the licence fee.”

“The DTH and cable operators have become the collector of tax from its subscriber base,” said Dish TV’s Goel, adding, “while there’s multiple taxation for DTH and cable operators, the multiplex industry with a similar business doesn’t pay any service tax.”

Besides multiple taxation, the industry feels charging entertainment and service taxes onfree-to-air (FTA) channels is not appropriate.

Anil Kumar Malhotra, COO - sales & operations, Wire & Wireless India Ltd, said, “In Maharashtra, entertainment tax on cable connection is Rs45 (per subscriber). Add service tax to that and the subscriber is paying approximately Rs160 i.e. around 60% over and above by way of taxation for FTA channels...something that is of essential value to the consumer.”

Echoing the sentiment, Anil Khera, CEO, Videocon Digital DTH Service, said, “There will be a lot of confusion on how much you really collect from a customer.”